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Oil prices drift as Trump’s about-face helps risk assets

LONDON, December 28, 2020 – Crude oil prices were broadly unchanged on Monday in thin trade, as President Donald Trump’s change of heart about signing the $900 billion Covid-19 relief package supported risk assets of all sorts.

Trump had initially refused to sign the package, in a move that appeared designed to embarrass Senate Republicans who acknowledged the verdict of the Electoral College when it declared Joe Biden the winner of November’s election.

While House Democrats have indicated they will support his push for higher direct stimulus checks to households in a vote scheduled for later Monday, the GOP-led Senate was largely responsible for capping the payments at $600.

By 9:15 AM ET (1415 GMT), US crude futures were up down less than 0.1% at $48.22 a barrel, while the international benchmark Brent was flat at $51.34 a barrel. Both contracts are only just below the nine-month highs that they posted just before the Christmas weekend.

Gasoline RBOB futures were down 0.4% at $1.3670 a gallon


Also indirectly supporting the market was the expectation of a reasonably smooth beginning to the new trading arrangements between the UK and EU. A last-minute deal before the Christmas break will allow trade in merchandise goods to carry on without quotas or tariffs, but leaves many other areas unclear.

Some analysts are cautioning against pushing the current rally too far, mindful of the short-term pressures on demand from a pandemic that has gained in strength in much of the northern hemisphere in the last month.

Rystad Energy expects a largely balanced market in January, with supply and demand hovering between 77.7 and 77.8 million barrels a day, but expects modest surpluses in the rest of the first quarter as supply runs moderately ahead of demand growth. It expects the market to swing to an increasingly wide deficit from May.

One of the big unknowns about the next 12 months is the trajectory of supply from Iran, historically a big exporter. Its exports had shrunk substantially under pressure from the Trump administration, but many expect that pressure to ease under the new administration.

“A change of administration in the US could mean that Iran comes back faster than we anticipate in our current base case,” Rystad’s Bjornar Tonhaugen said in emailed comments, “either because Biden’s team decides to remove sanctions altogether or because countries like China or India feel confident enough that the new administration will turn a blind eye to the existing sanctions and ramp up imports.”

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